The Finance Thread

[SillyBilly]

20 hours ago, alexxxxx said:

due to the political turmoil currently in the UK and the knock on effect of a more likely leave vote - is there an oppurtunity to make some money by buying USD/CHF/CAD/AUD and selling in June/July? Or is the risk essentially priced in?

I don't trade nor know much about CHF personally but I wouldn't go near it at present. Most people would probably be surprised to know the Swiss are by far the worst offenders when it comes to the funny money game. Look at the scale on the graph below, since about 2007-08 (to 2016) the balance sheet of the SNB has balloned 6 times! Compare that to the likes of the other QE shakers like us and the Yanks who have between 3.5-4 times expansion. The Swiss have been at it more than the Japanese!

 

I personally wouldn't buy A$ as they are too closely linked to China and China is a ticking time-bomb of toxic debt. China crashes the world crashes but Oz would feel it more than any other developed country (and so to their currency).

CAD wouldn't buy it if could avoid. I have quite a few investments denominated in CAD so have some exposure to it, I figure it is a slightly better bet than the GBP short term so quite happy to hold. Would not actively buy though. Canada has zero ounces of gold reserves now, they have officially flogged the lot (they had 77 ounces at the start of March this year!!!). Might not think this is a big issue but with an economy on its arse, China just getting going (Canada is a major commodity exporter) and no gold you come to the logical conclusion the only thing backing the CAD is effectively the USD. In which case you should own the greenback.

You can probably tell I have gone for the long USD short GBP trade on that basis! It has been a steady performer over the last few months. I have mentioned earlier in the thread that in a crisis I would not bet against parity to USD like we had in the 80's, though that is obviously the extreme end of the scale. Our account deficit is abysmal, our budget deficit is the highest in Europe (and probably the developed world?), we have uncertainty over our very sovereignty, I am actually surprised anyone would buy sterling at the moment!

Whether it is priced in, you make your mind up on that. I took my position early on this one but am still considering putting more money down. Particularly as everyone seems to be waiting to see what happens in stocks and gold/silver, market is pretty rudderless at present.

 

[LesterRam]

IMF: Brexit could cause severe damage

oh my god its relentless, so to take the pressure off Mr Cameron he has contacted the IMF to chirp up, if we had done the absolute opposite of what the IMF said we would be quids in.

 

[LesterRam]

when is the next bailout for Greece due again?

[SillyBilly]

2 hours ago, LesterRam said:

when is the next bailout for Greece due again?

Debt to GDP is about 180% now, projected to be as high as 185% by year end. They are implementing the Troika demands to the letter at present in an attempt to use their complicity as negotiation for debt relief. Without the debt relief by end of 2017 they'll be back even more desperate as that is when the fiscal shortfall officially hits, we'll likely see the Euro and the EU face its biggest challenge to date then. The cynic in me thinks Dave (and his European counterparts) knew this when he called a quick 2016 referendum. With how shaky the EU project is it makes perfect sense to get it tied up sooner rather than later. Better to settle the sovereignty question "for a generation" right before we head into another Euro calamity.

Seems a lot of talk is going off behind the scenes at the moment.The Federal Reserve had an impromptu meeting yesterday that took most people off guard (not common to call unscheduled meetings). Yellen had a meeting with Obama as well to discuss "trade notes" (not often does Yellen get a private audience with the president at short notice). The G7 Finice Ministers are meeting tomorrow in Washington and later this week the World Bank will have its bi-annual meeting. This to a backdrop of the Atlanta Fed's projected growth for the US economy in Q1 as 0.1% GDP. Assuming they have any positive inflation number and that figure is correct then US isn't looking too healthy.


 

 

 

[eddie]

Why is economic growth deemed to be fundamentally necessary, when it implies that you have to consume more this year than we consumed last year? Surely that can only end one way.

[LesterRam]

http://www.bbc.co.uk/news/uk-36036922

20k Syrians will cost the UK economy £500m, can we afford this amount of expenditure for only 20k people?

[SillyBilly]

19 hours ago, eddie said:

Why is economic growth deemed to be fundamentally necessary, when it implies that you have to consume more this year than we consumed last year? Surely that can only end one way.

A ponzi scheme has to continuously grow otherwise the whole system collapses. Think about how "money" is created for a second (since 1971 - this monetary system is 45 years old). It is created as debt (via fractional reserve banking or government bond issuance). Debt has to pay interest.

So imagine a scenario where there is only 1 dollar in existence and it was created as debt (as is the case). How do you pay the interest on that 1 dollar when there is only 1 dollar in existence? Of course you can't with a finite money supply...so....you have to....

a) CONSTANTLY expand the money supply (i.e. increase credit into the economy - basically increase indebtedness). Use new money to pay off old money. And use newer money to pay off new money. You get the drift.

b) CONSTANTLY have growth in the economy. If debt is allowed to go bad (or even you attempt to actually pay back all the debtt!!!) then the system crashes.

On b) think about what "deflation" is, it is defined (in its truest form) as a reduction in the money supply. Going back to our original example if we had 1 dollar in existence and paid 1 dollar back immediately, we have destroyed currency in the process, it is like matter meeting anti-matter. Our system can't handle that (it needs a)) as it requires constant expansion of the money supply, the only viable route for the preservation of our monetary system is therefore growth by ever more debt creation.

And that is why austerity doesn't work (it will set off a deflationary death spiral as debt cannot be repaid) and that is why perpetual growth doesn't work (its a ponzi scheme). This is not actually complex stuff, our monetary system is a ponzi scheme based on confidence and thus one day it will have to collapse (when the expansion becomes so big it loses all credibility). As with all ponzi schemes it goes bigger and harder at the end (like we're seeing with these extraordinary monetary policies just to keep it going that little big longer.

Ofcourse the system works terribly well for those who skim money off it every step of the way. So they will fight to preserve it as long as they can.

[eddie]

In other words, the whole economy is not only flawed - it is doomed to fail long-term, because sooner or later you exhaust your supply, or use all your raw materials, and of course perpetual motion is impossible because it contravenes the laws of thermodynamics.

[Zag zig]

4 hours ago, eddie said:

In other words, the whole economy is not only flawed - it is doomed to fail long-term, because sooner or later you exhaust your supply, or use all your raw materials, and of course perpetual motion is impossible because it contravenes the laws of thermodynamics.

The economy is flawed because the principal measure of its prosperity is Economic growth. Where economists and politicians fail is in their assertion that GDP is a measure of economic success.

The state consumes and destroys in reality, when the West realises you cannot keep growing and starts valuing/ allocating resources more wisely things may change. There is a movement and I've been to a few meetings on the subject of transition towns, unfortunately it's buy in is low at present but examples can be found in such as Totnes, that even developed the Totnes pound as a means of a local currency.

However until things get real bad, don't expect the wider populace to wake up from the ponzi growth based couch potato slumber, reliant on perpetual growth, because right now too many benefit cushions exist for widespread change. When the pounds, dollars, euros run dry however who knows.

[LesterRam]

10 hours ago, Zag zig said:

The economy is flawed because the principal measure of its prosperity is Economic growth. Where economists and politicians fail is in their assertion that GDP is a measure of economic success.

The state consumes and destroys in reality, when the West realises you cannot keep growing and starts valuing/ allocating resources more wisely things may change. There is a movement and I've been to a few meetings on the subject of transition towns, unfortunately it's buy in is low at present but examples can be found in such as Totnes, that even developed the Totnes pound as a means of a local currency.

However until things get real bad, don't expect the wider populace to wake up from the ponzi growth based couch potato slumber, reliant on perpetual growth, because right now too many benefit cushions exist for widespread change. When the pounds, dollars, euros run dry however who knows.

I was in Totnes, Devon last week and didn't notice any "Totnes Pound", is this widely available in this neck of the woods?

[Ramarena]

Look's like China is introducing a gold benchmark next week. 

http://www.reuters.com/article/china-gold-fix-idUSL3N17G2W4

I wonder what implications this could have on the currency market? Could this eventually lead to the accelerated devaluation of western currencies, primarily the Dollar, Euro and Pound?

Also heard about Obama, Biden and the FED having two emergency "behind closed doors", meetings this week, in relation to the banking sector. There's a G20 meeting next week as well, where there will be a huge amount of problems to "discuss".

I've got a bad feeling things are starting to move behind the scenes.

[Wolfie]

This thread never fails to cheer me right up.

[Zag zig]

2 hours ago, LesterRam said:

I was in Totnes, Devon last week and didn't notice any "Totnes Pound", is this widely available in this neck of the woods?

No idea, some time since I got involved in the subject. The theory is interesting, google it for knowledge same goes with transition towns. They are concepts that have been similarly promoted by the likes of Chris Martenson and ilk. There are forums around dedicated to this, spin offs from the P.M sites with more emphasis on sustainable living and locality for better words.

Ive been to a few meetings in Bristol and down that way, there is a low key group operating around the East Mids and Derby or was, but the well intentioned people never really inspired me locally and I didn't have the time to get over involved.

[GboroRam]

50 minutes ago, Zag zig said:

 P.M sites 

Pork bestiality?

[Zag zig]

Nah boring precious metals.

[LesterRam]

44 minutes ago, Zag zig said:

No idea, some time since I got involved in the subject. The theory is interesting, google it for knowledge same goes with transition towns. They are concepts that have been similarly promoted by the likes of Chris Martenson and ilk. There are forums around dedicated to this, spin offs from the P.M sites with more emphasis on sustainable living and locality for better words.

Ive been to a few meetings in Bristol and down that way, there is a low key group operating around the East Mids and Derby or was, but the well intentioned people never really inspired me locally and I didn't have the time to get over involved.

i have a lovely suggestion for Devon, would it be possible to make the roads an incy wincy bit wider than my actual car, I do like the local economy idea though

[SillyBilly]

18 hours ago, eddie said:

In other words, the whole economy is not only flawed - it is doomed to fail long-term, because sooner or later you exhaust your supply, or use all your raw materials, and of course perpetual motion is impossible because it contravenes the laws of thermodynamics.

It is the way of all fiat currencies and our economies are built around them. Our monetary system is inherently inflationary as it requires that expanding money supply. This inflation issue is a moot point where you will get academics arguing what inflation is, is it increase in prices, or is it an increase in money supply (i.e. amount of currency in existence)? It is the same thing really (to my mind), more dollars in existence will mean those dollars invariably chase the same goods and services within the economy (and push prices up - fairly logical). Inflation is ultimately the erosion of value of the currency. So our currencies are by design pre-determined to become worthless as the money supply expands. Value moves to zero with time. History shows this erosion of value (for fiat currencies) speeds up with time (not a linear curve, but exponential). The death of a fiat currency is when confidence is lost in the ability of the currency to sustain value even in the near term. We can see in the last 10 years massive amounts of currency have been created to sustain the system, the odd thing is that all this currency has not hit the economy so there has been no real inflation or deflation from that point of view (it is on central bank and commercial bank's balance sheets). E.g. an extra $3 trillion is sitting with the Fed Reserve since 08. Nobody really knows what is going to happen next as a result, we have this broadly deflationary environment as we have reached peak debt (credit growth is slowing as people and businesses have become saturated in it) and we have this extraordinary monetary policy plugging the gaps (and yet they have no idea how to reverse the policy and "normalise" our economies again). This is unprecedented stuff really.

[eddie]

The 'World Debt Clock' indicates that the sum total of debt across all countries is now over 60 trillion dollars.

Who does Planet Earth owe it to?

http://www.nationaldebtclocks.org/

https://en.wikipedia.org/wiki/List_of_countries_by_external_debt

[SillyBilly]

7 hours ago, Ramarena said:

Look's like China is introducing a gold benchmark next week. 

http://www.reuters.com/article/china-gold-fix-idUSL3N17G2W4

I wonder what implications this could have on the currency market? Could this eventually lead to the accelerated devaluation of western currencies, primarily the Dollar, Euro and Pound?

Also heard about Obama, Biden and the FED having two emergency "behind closed doors", meetings this week, in relation to the banking sector. There's a G20 meeting next week as well, where there will be a huge amount of problems to "discuss".

I've got a bad feeling things are starting to move behind the scenes.

It would be interesting if things deteriorated at the very point of the white house keys changing hands. Exactly as it did 8 years ago. Obama walked into a **** storm. You can't ignore politics here considering it is government and central banks who effectively control the markets these days (or in the case of Japan increasingly own the market). I can't see anything happening for a while personally but I am watching the American election very closely.

International imports of gold though regular channels into China are traceable and as such China had to update its gold reserves in 2015 to 1750T+ (though didn't for years anyway). But what about internally gold mined? China mines about 450T a year and none of it leaves China. The government is almost certainly buying the vast majority if not all of it. And has been doing so for years. I don't think it is a conspiracy theory to plainly acknowledge China is sitting on at least 4000-5000T now and possibly a lot more. They will set the price when they hold it, the West used to set the price because we held it. They could hit the West where it hurts when the time is right for them (least one would assume that is what they are covertly doing). Systemically moving their reserves out of dollars (and weakening the dollar standard in the process) and moving it into gold (and strengthening the credibility of Yuan with more gold backing) is clearly a state policy. Inclusion in the SDR another. Whether people think gold is a relic or not, the West is taking a huge gamble as India, China and Russia are buying everything we have. For 5000 years, prosperity has always been with he who owned the gold.

[Ramarena]

7 hours ago, Wolfie said:

This thread never fails to cheer me right up.

True, sadly a sign of the times. At least it's not another thread moaning about "waffle".